What Is a Roth IRA Account?

Roth IRAs are retirement accounts that offer tax-free growth and tax-free withdrawals on your investments.
Reviewed by Michael Randall

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What is a Roth IRA?

A Roth IRA is an individual retirement account where you put after-tax dollars and enjoy tax-free-growth and withdrawals. The main benefit of a Roth IRA is that unlike a traditional IRA, you can make withdrawals without paying taxes on your contributions and earnings once you retire.

» Use this Roth IRA calculator to see how much to contribute.

How does a Roth IRA work?

You take after-tax dollars, which is money you’ve already paid federal, state and withholding taxes on, and put them into your Roth account. You then choose your investments. Any interest gained on your investments grows tax-free.

The benefit of a Roth IRA is that your withdrawals during retirement are tax-free because you already paid taxes on the money before putting it into your IRA. That is, as long as you wait until you're 59½, and have had the account open for at least five years, counting from the tax year of your first contribution.

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What is the Roth IRA contribution and income limit?

You can open a Roth IRA, as long as you meet the income limits (in the table below), and have income from work (the IRS term is "taxable compensation"). There are also limits to how much you can contribute to a Roth account.

Filing status

2022 or 2023 Income range

Maximum annual contribution

Single, head of household, or married, filing separately (if you didn't live with spouse during year)

2022: Less than $129,000.

2023: Less than $138,000.

2022: $6,000 ($7,000 if 50 or older).

2023: $6,500 ($7,500 if 50 or older).

2022: More than $129,000, but less than $144,000.

2023: More than $138,000, but less than $153,000.

Contribution is reduced.

2022: $144,000 or more.

2023: $153,000 or more.

No contribution allowed.

Married filing jointly or qualifying widow(er)

2022: Less than $204,000.

2023: Less than $218,000.

2022: $6,000 ($7,000 if 50 or older).

2023: $6,500 ($7,500 if 50 or older).

2022: More than $204,000, but less than $214,000.

2023: More than $218,000, but less than $228,000.

Contribution is reduced.

2022: $214,000 or more.

2023: $228,000 or more.

No contribution allowed.

Married filing separately (if you lived with spouse at any time during year)

2022 and 2023: Less than $10,000.

Contribution is reduced.

2022 and 2023: $10,000 or more.

No contribution allowed.

If you don't qualify for a Roth IRA, you have the option of contributing to a Roth through the backdoor Roth method also known as a Roth conversion. This type of conversion allows you to transfer money from your traditional IRA or 401(k) into a Roth, but you have to pay taxes on the money first. There are no restrictions on income limits or marital status for backdoor Roths, so anyone is eligible to open one.

Read our Roth IRA income limits and contributions guide for more details on Roth IRA income limits and the exceptions to them.

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What are the benefits of a Roth IRA?

What makes a Roth IRA so attractive to investors is the potential tax savings. If you think you'll be in a higher tax bracket when you retire than you are now, a Roth IRA may be more beneficial than other retirement accounts, such as a traditional IRA. The reason is, you've already paid taxes on your contributions, so your higher tax bracket won't result in a high tax bill when it's time to enjoy your hard-earned money.

Another reason the Roth IRA is attractive is rising inflation. Inflation erodes the value of money over time. If you pay taxes now, you won't have to pay them in retirement, when taxes may be higher.

Some other benefits of a Roth IRA, include:

  • No required minimum distributions: Account holders of Roth IRAs aren't subject to the required minimum distributions required from a traditional IRA or 401(k) starting at age 72.

    This means account holders don't have to withdraw distributions at any point while they're alive, unlike with traditional IRAs or 401(k)s. However, it's worth noting that inherited Roth IRAs are subject to RMDs, unless you're inheriting it from a spouse. There are special rules in those circumstances.

  • No income tax on inherited Roth IRAs: If you pass a Roth IRA to a heir, they enjoy tax-free withdrawals as long as the account was held for at least five years at the time of the account holder's death.

  • Easy withdrawals: You can withdraw the money you contributed any time, without taxes or penalty. (You may be taxed or penalized if you withdraw investment earnings.)

  • Double dipping: You can contribute to a Roth in addition to a 401(k).

  • Flexible timing: You can choose when and how much you contribute to a Roth IRA. For example, you could contribute $6,000 on the first day of the year, or split up your contributions throughout the year.

  • Extra time to contribute: You have until that year's tax deadline to contribute for the previous calendar year.

  • Tax-free distributions: Once you hit 59½, and have held the account for at least five years, you can take distributions, including earnings, from a Roth IRA without paying federal taxes.

  • No age limit to open: You can open a Roth IRA at any age, as long as you have earned income (you can’t contribute more than your earned income).

How do you invest in a Roth IRA?

Investing in a Roth IRA is pretty straightforward, but you just need to make sure you meet the income requirements mentioned above first. If you do, decide whether you want to do passive or active investing, and choose the best Roth IRA provider for your investing approach.

For example, if you aren't keen in the idea of constantly watching the stock market and trading, you may want to do passive investing and use a robo-advisor. Robo-advisors do all the work of choosing securities for you based on your investing goals. If you enjoy day trading, options, and other active investing strategies, then opening a regular Roth IRA brokerage account may be the better option.

There are several types of securities you could invest in using your Roth if you choose a more hands-on approach to investing. Some of them include:

» Ready to get started? Read our step-by-step guide on how to open a Roth IRA

What are the Roth IRA rules?

Here are a few withdrawal and distribution rules you must follow:

Roth IRA withdrawal rules

  • You can withdraw your original contributions whenever you want, without owing any penalties or taxes, no matter how long your account has been open. That's because the money you put in is money you've already paid income tax on.

  • When you withdraw money from a Roth IRA, the IRS always assumes your original contributions come out first.

  • People at least 59½ years old, and who hold their accounts for at least five years can take distributions, including earnings, without paying federal taxes.

    IRS. Traditional and Roth IRAs. Accessed Mar 17, 2022.

Roth IRA withdrawal penalty

Qualified withdrawals of investment earnings in the account come out tax-free. The key here is "qualified." If you withdraw earnings before 59½, or otherwise don’t meet the rules for a qualified withdrawal, the IRS may want a piece of those returns, in the form of taxes and a possible penalty. Examples of qualified withdrawals include up to $10,000 to buy your first home, qualified education expenses, health insurance premiums while unemployed, disability related expenses, having a baby or adopting.

» Get a better understanding of Roth withdrawal rules

What's the difference between a Roth IRA vs. traditional IRA?

The main difference between a Roth IRA and traditional IRA is in how they're taxed. Roth IRAs give you tax-free withdrawals after retirement, while traditional IRAs give you a tax break beforehand. So, if you want an immediate tax break, consider a traditional IRA. If you like the idea of tax-free income in retirement, Roth IRAs might be a better option for you. You can read our Roth IRA vs. traditional IRA article to learn more about the differences.

» Read our top picks for the best Roth IRA accounts

Frequently asked questions

There are a few drawbacks of a Roth IRA:

  • Five-year wait to withdraw earnings: Waiting five years from the tax year of your first Roth IRA contribution to withdraw earnings tax-free can be a drawback if you’re close to retiring. Withdrawing contributions before fulfilling the five-year rule could result in paying income taxes and a 10% penalty.

  • No tax deductions: You also aren’t eligible for any tax deductions during the year you contribute, unlike with a traditional IRA. Tax deductions are helpful as they can reduce your adjusted gross income, and your overall tax bill for the year you contribute. You may qualify to claim the saver’s credit, which is a tax credit you get for making eligible contributions to an IRA. Keep in mind that the credit has income restrictions.

  • Income limits: Roth IRAs have income limits unlike traditional IRAs. If you make more than the allowed amount, you may not qualify for a Roth IRA.

Many discount brokers and robo-advisors have $0 minimums to open a Roth IRA. You can see which ones in our roundup of best IRA providers. However, the tax perks of investing in an IRA start only when you start contributing money to the account. The IRS allows you to contribute up to $6,000 in 2022, or $7,000 if you’re age 50 or over, but you are not required to contribute the maximum. In 2023, you can contribute up to $6,500 or $7,500 if you're 50 and older.

You can add money to your Roth IRA at whatever cadence and amount work for your budget. Many brokers and robos allow you to set up automatic deposits to transfer money from your bank into your Roth account.

Yes. You can put your IRA money in a variety of investments, and some of those investments may lose value.

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